Technical analysis - Relies solely on historical price action and computed indicators to forecast future stock price. Besides price action, a number of other related indicators such as oscillators, volume and moving averages are typically used in technical analysis. Technical analysis can be very helpful for calling short-term price movements and for timing market entry and exit points.

Fundamental analysis - Often involves interpreting the micro and macro indicators in order to determine the value of a company. Fundamental analysis can be better for forecasting longer-term stock price moves.

Basically, both forms of analysis can provide ample opportunities for traders to profit. Analysis is a tool, and when placed in the right hands and used in moderation, will generally enhance trading profits and opportunities.

Pros and Cons of Technical Analysis

While some fundamental analysts liken technical analysis to reading tealeaves or palms, technical analysis provides one of the best and most objective tools available for quickly and accurately assessing a market and then trading it profitably. One of the potential benefits of technical trading consists of the fact that the same data is also being watched by millions of other traders.

This phenomenon can lead to a herd effect in some cases when classic chart patterns can be clearly observed. In essence, the many traders who see the pattern and trade accordingly can help the pattern's measured move materialize. Nevertheless, the disadvantage of this is that like-minded technical traders tend to position their stops at the same levels. This could magnify a decline or prompt a stronger rally, and might even allow large players to intentionally trigger such stops which they can reasonably anticipate based on their own reading of the charts.

Pros and Cons of Fundamental Analysis

• It is generally a smart practice to invest in a company with sound financials that is witnessing material revenue growth.
• The problem with fundamental analysis is that you are still making predictions about the future that may not come true.
• Fundamental analysis can be a lengthy, complex process.

Remember that even if a stock looks financially healthy and is relatively cheap compared to its peers, that doesn't mean that it will always rise in value. A stock's price is also determined by the supply and demand of its shares.

Some traders prefer technical analysis and take issue with fundamental analysis on the basis that:

• Its information is largely already priced into the market
• It is time consuming and complicated to perform
• It often requires an economics background
• It does not give objective trading signals